Arbitrator Is The Master of Evidence; Court In Appeal Cannot Reassess Facts: Delhi High Court

The Delhi High Court has recently reiterated that an arbitrator is the master of both the quantity and quality of evidence, and therefore the court, while exercising appeal or supervisory jurisdiction, cannot reappreciate factual findings recorded in an arbitral award.

The court emphasized that it does not sit as a court of appeal over the findings of the learned Arbitrator and its role under Section 34 is 'restrictive jurisdiction' and it cannot travel beyond the four corners of it. 

A single bench of Justice Jasmeet Singh made the observation while hearing National Building Construction Corporation's (NBCC's) challenge to an arbitral award.

The court reiterated that “the Arbitrator is the master of both the quantity and quality of evidence, and once the Arbitrator, upon due appreciation of the record, has reached a reasoned conclusion which does not disclose any perversity or illegality, no interference is warranted.”

"It is a settled proposition of law that while exercising jurisdiction under Section 34 of 1996 Act, this Court does not sit as a Court of appeal over the findings of the learned Arbitrator. The scope of interference is limited to the grounds specifically enumerated under the said provision. The Court is not expected to re-appreciate the evidence, reassess the factual matrix, or embark upon a mini-trial as if it were hearing an appeal on facts", it added

The dispute arose out of a contract for flooring and cladding works at the Vashi Railway Station–cum–commercial complex in Navi Mumbai. NBCC, which was executing the project for Indian Railway Construction Company Limited (IRCON), subcontracted the work to Sharma Enterprises in 1991.

NBCC terminated the subcontract in September 1992, prompting the contractor to invoke arbitration. In 2016, the arbitrator awarded Sharma Enterprises Rs 53.28 lakh with 10% interest and rejected all counterclaims raised by NBCC.

NBCC argued that delays were attributable to the contractor, that extra-item claims were not payable under the contract, that bank guarantees could not be refunded, and that the arbitrator had wrongly granted interest despite a contractual prohibition.

Sharma Enterprises submitted that delays were caused by NBCC and the civil contractor Mohinder Singh & Co., and that additional items were executed on NBCC's instructions. It also said bank guarantees worth Rs 19.01 lakh were encashed illegally in 1997.

In upholding most of the award, the court relied on the arbitrator's findings, including that Mohinder Singh & Co. had completed only about 7% of the civil work in nearly two years, leaving the contractor unable to begin flooring and cladding. The arbitrator also recorded delays in drawings, lack of site access, revised material specifications, and NBCC's silence when notified about extra-item rates.

The court agreed with the direction to refund security-deposit bank guarantees and upheld the award for extra items, noting that NBCC had changed granite specifications and that a letter purportedly rejecting the claim appeared fabricated.

On interest, the court held that agreement barred interest on delayed payments, restricting the arbitrator's ability to award pendente lite interest (interest during the pendency of the dispute). Finding no perversity or illegality in main findings except on the interest, the High Court only partially allowed NBCC's challenge.

Case Title: National Building Construction Corporation vs Sharma Enterprises

Citation: 2025 LiveLaw (Del) 1562

Case Number: O.M.P. (COMM) 215/2022

Click Here To Read/Download The Order